Statutory regulation of the sale and rent back sector is necessary to protect homeowners, the OFT has stated.
The Office of Fair Trading (OFT) has recommended that sale and rent back schemes be better regulated to ensure greater protection for consumers. In a report, the body concluded that such deals have the potential to cause "serious and permanent harm" to vulnerable homeowners.
Its market study found that some consumers have entered into sale and rent back transactions when other options would have been more suitable. It also found that a number of homeowners may have been misled as to the value of their property or their right as tenants to remain in their home.
Statutory regulation of the sector by the Financial Services Authority would help to eliminate these problems and protect consumers who may otherwise lose their home or experience serious financial problems, as well as allowing them to seek redress.
John Fingleton, chief executive of the OFT, said: "Recommending statutory regulation is not something we do lightly or often, however in this case we consider it necessary to put a stop to the unacceptable behaviour of some sale and rent back operators and to ensure consumers are better protected."
The Council of Mortgage Lenders has welcomed the call for regulation. It said voluntary measures have already helped to improve transparency in the sector, but insisted a regulatory approach is needed to ensure a level playing field.
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